Stocks or funds?

Stocks or Funds? I strongly prefer one over the other when it comes to investing my money

Stocks or funds? In this post I’ll talk about my self-professed finance-nerdiness, and why I prefer branch specific index funds over stocks.

I have to admit, I am a huge finance junkie. The same way some people go in and check facebook or instagram multiple (I really don’t want to give an estimate here for embarrassing reasons) times a day, I go in and check the stock market. I am perfectly content with peeking in without buying, the satisfaction comes from feeling up to date and “checking in”. As it is not hurting anyone, I have not tried to regulate this and thus let myself engulf freely in this little guilty pleasure.

A few posts ago, I talked about my investment strategy and mentioned both index funds and stocks as different investment options. As the above self-professed stock-market junkie I am, you would think that I am all about the stocks, options, warrants and all sorts of speedy hedgefund-y ways there are to up your capital out there.

In reality, this is not true. I am very much a vanilla-investor. I observe, and look, and wait, and maaaybe I’ll put in a little bit, just to check how it feels. And then some more. But I seldom buy stocks (relatively seldom, of course it happens).  I have a very realistic expectation of what I know and don’t know, and when it comes to stocks I just know too little about most underlying companies to make a potential investment more than a gamble. In addition, since the price of the stock is not really about the price of the company (just look at H&M nowdays) but what the market thinks of the price, I know even less.

Why I prefer index funds

What I do know, however, is the general status of the world. Almost as much as I like checking in on SP500 et alia I am constantly hooked in on the world news. And because of this, I prefer branch specific index funds. A fund, essentially a bundle of stocks with a common denominator like geographic area, industry (or a combination of them) is by this definition spreading the individual risk of each company out over many similar ones. I don’t have to know much about each individual company, but I do need to know about the collective status of their respective industry, for example.

love reading up on current events, and have been tracking world news since I was a kid (again, clearly one of the very cool ones growing up) so this suits me perfectly. There is a certain satisfaction in seeing the market in a specific industry unravel before you after a few indicative events. That is my medium. It also works really well because it is easy to hedge myself even more and step one macro level further out and go from very branch-specific to more global funds, and in this way  spread the risk even more, if I want to.

For now, I stick to my active obsessive stalking of the financial markets, and my branch specific index funds, and we will see how this works out for now. 

What is your take on this?

 

Freddie

The start of the FIRE Saga

Fire: Is not the least I can do making my wildest dreams come true?

I decided to start working towards financial freedom and FIRE after a three-step-thought process that looked something like this:

1. Mental step –

I was contemplating how fortunate I was being in the position I was; a wonderful job, good savings, having had great (free!!) education, stable home life, amazing Mr Viking,  essentially feeling very grateful. This lead to contemplation about what I should do with this fortunate life I have been thrown into. What should I do? I have always been a goal-setter when it comes to life, but this time it was different.

This time I felt like I owed it to myself to really and fully think about what I wanted to do the most. I had to realize how fortunate I had been to be put down on earth in a position where I actually had leverage to make many things happen. How many other women in the world could say the same? Is not the least I can do then making my wildest, scariest dreams come true?

How few are the countries I would have had to be born in to being given even a realistic percentage of ending up with parents educating me enough to have me probabilistically set myself up for an economically good future?? And then have me coincidentally ending up being clear-headed enough to realize this advantage?

There are always amazing outliers, rising up agains the challenges their backgrounds have brought and winning, but the thing is, I am not one of these outliers. If anyone has had the opportunity to set themselves out to a good start, me and my fellow Scandinavians out there are definitely in that group . Given the poverty, inequality and suffering in the world, it would be a blind lie to say otherwise. 

My financial independence goal will be a real challenge given the heavy taxation in my country, but seriously, have I not been given all the tools I need to handle it? No, as I contemplated further, I owed it to the collective sum of all of these incredibly low probabilities to at least give my financial opportunities a serious thought.

Similar thoughts continued to spiral into an understanding of how important it is for me to feel like I have a choice. I thrive in multi-choice environments and never feel more alive than in the eye of a storm of possibilities. Freedom to have possibilities, and freedom to choose between these ended up being the only constant I could define for myself in the endless list of things I want to do and accomplish in this life. This freedom is what I want.

This is how I came down to the goal of financial independence.

2. Information-gathering step: What is FIRE?

Is this something anyone has done? I mean, don’t you have to be born into ridiculous wealth, or be lucky enough to invent Google to become financially independent?

In Scandinavia, being able to live off of your wealth is just not something you do. And the people that do have left the country a long time ago. So what do you do when you are fairly certain you are among the very few to have though of something few others have? You google it only to realize you are one hundred percent wrong. 

I started reading. And reading. Several weeks of me gathering information about people doing this crazy financial independence “FIRE”-thing. Mr Viking got equally excited. This wasn’t just a small boys club of little rich dudes from Switzerland as I first thought it would be (sorry for the horrific generalizations here). These were people everywhere. From all over. People just like me, who slowly but surely worked out a strategy for accumulated savings aka freedom and not letting anyone stopping them. I was amazed.  I wanted in.

3. If this is going to be a journey, why not invite the rest to come along? -step

I loved to write a few years ago. Now I write code all day, but due to lack of time (read bad prioritization) I barely ever write normal text. After having received so much FIRE-input for so many weeks (see step 2) I felt this big bold blurb of words inside of me. I had things I wanted to say about this. I wanted to share. If I was doing this for sure, trying to reach financial independence as soon as I could, why shouldn’t I let everyone that wanted read my story?

Looping back to step 1, it turned into this reasoning about how this was almost the least I could do. So I started. And my fingers started writing by themselves. Self conscious about writing in english I stopped and erased. And started over. And over. Until I realized that it wasn’t about the language, or about the stylesheets or the color themes. The writing had nothing to do with that and everything to do with how light I felt after each post. How happy it made me to write. How incredibly impressed by the thoughtful comments and feedback I have received from the FIRE community since starting.

This is still a tool for me to realize my FIRE goal. But independently of that, it has become a goal in itself, with an intrinsic purposefulness that really has nothing to do with the first goal.

Thank you for following me on this route.

/FV

How to save over 200 USD a month with 3 golden tips

How to save over 200 this month with these three tips

It is not always easy to cut down your costs  and save money when you have routines that you have had for years, perhaps since you were a child. However, these small routines are sometimes where you will find the easiest ways to cut down on your spending and save money. This month I have done 5 things that has cut down my costs significantly.

3 things I have done to cut down my costs and save money  over 200 dollar this month!

  1. I have biked everywhere. I normally bike every now and then but this month I have made a point of bringing the bike with me all the time. Great exercise!!!
  2. Mr Viking and I have dutifully implemented the One Simle Purchase Rule
  3. White month! As the Viking I am, I tend to drink alcohol every now and then, and Mr Viking and I very much enjoy a glass of red after a long day of work. Cut off alcohol completely this month and noticed two things: a) I am saving more money than I thought! A good bottle of wine pays up to ca 20 USD so lets say we have saved at least 40 bucks on this. b) My skin looks great! I want to continue with this.

These are things that has made me save in total more than 200 USD. 

In one year this is adding up to 2400 dollars. Insane. Tips: Write down right now what you would do if you were given 2400 dollars out of the blue right now. Keep this as a motivational note.

It is not on par with MrMoneyMustache  but everyone has to start somewhere and these are definitely three tips that anyone can follow. If you try it one single month, you will still save a lot of money.

Bitcoin, Ethereum and other cryptocurrencies

Crypto currencies bitcoin ethereum are they here to stay

Bitcoin and the legacy of cryptocurrencies

Five years ago I was convinced that Bitcoin, bearing the legacy of all cryptocurrencies, had reached its peak.  From here on it would silently fall into oblivion, sort of like those horrific 5-second snippets of music people used as their ringtone back in the 90s just because technology allowed for it. I will never be able to hear the first tones of Sugarbabes ’round round’ without a stressed peak in adrenaline, and a nervous glance at my phone. Anyway, I was convinced it was a done deal.

As we can see, these are clearly one of those wonderful far-sighted things I was completely on point with (please hear the Scandinavian irony here).

bitcoin price cryptocurrency development
Price of bitcoin in the past five years, picture from www.bitcoin.com

Bitcoin has rushed like nothing else in the past few months, and there are a few forerunners along with it like Ethereum that are making its way up too.

As a newbie-bitcoiner and a borderline-news-junkie  I am torn between what to think of these. This is definitely the high-risk part of The Leprechaun .

Yes side

Yes, I see the future of finance, the internet finally seeing its legacy being instantiated into something tangible and useful, outmaneuvering the big, bad, corporate banks and so on. Sure. 

No side

But I also see the fragility, the marketplace made for people that have reasons to want to not be traced (human traffickers, illegal exporters etc.) and heaps and heaps of sites with semi-legit (read fraudulent) dealers, shadow-sides that mirror real online markets where people send their money somewhere where they will never see them again.  All without the slightest legal chance of getting them back.

But still

Still, I am ending up on the yes side. I think that as the years are starting to add up, it speaks for the probability of cryptocurrencies being here to stay. As more and more people are using it, the legitimacy as well as its liquidity increases tenfold. In addition, I am a firm believer that technology capabilities like this (music ringtones being the exception) cannot every be banned, it will only increase its attraction. We are making this a “good” force to be reckoned with, but only as long as the masses keep latching on to it. This is mainly because the technology behind blockchain is genius and unprecedented in its its usability as a financial mechanism.

What do you think?

 

— Note that I am only expressing my own opinion and not speak in any professional capacity nor giving any financial advice.

FireViking Goals – Blog goals

4-week blog goals

Purpose of TheFireViking – track Financial Independence goal

My purpose with starting this blog was to find a place to write down my thoughts and strategies concerning me and my boyfriend’s goal to become financially independent within the next decade, not setting strict blog goals. As I started writing I realized there were a whole community of people out here doing the same thing. An awesome community, may I add. This has led me to put more and more time into this blog and my interactions with the community around it, up to the point where I now want to clearly define this as a sub-project to the overarching goal of financial independence.

Fireviking now gets its own blog goals, hooray!

How many readers does a blog have after one month? Will I try to make money on my blog?

I am not yet ready to venture into the whole business of affiliate links, advertisements on the site and so on, but I do want to start setting some goals for myself on here nonetheless (if it is not already blatantly obvious, I am incisively competitive, and goal-setting is one of my favorite things).

The children of TheFireViking.com has sprung out onto Twitter, Instagram and to some extent, Pinterest (seriously struggling with this though) and I want to set monthly goals for all of these to track their progress.

When Fireviking is 4 weeks old, the following are my goals:

Blog views: 1000

Twitter followers: 100

Instagram followers: 100

Is this realistic? Or am I putting under-achieving goals here? I am realizing that these numbers probably grow a bit exponentially in the beginning but have no idea of how much, so didn’t really account for that.

How did your blog develop in the first month when you started?

/FV

 

Financial Independence: My investment strategy in 4 easy steps

See my investment strategy to reach financial independence with 4 easy steps

My Strategy to financial independence

If you read my last post you know how much I was able to save from my last salary. The next implied question then naturally becomes; what do I do with that money in order for it to grow me some financial independence? This post will talk about what i do with the money that I invest into the Leprechaun , i.e. my investment strategy to Financial Independence.

Four easy steps —

Number 1)

Get an income stream, and preferably more than one. You can never save money if you don’t get any money, so this is the most crucial step, even if the actual salary is not that important. I get my salary each month.

Number 2)

I have a set saving goal each month, lets call it X . This sum I need to invest. The biggest mistake you can make is leaving that money passively deprecating itself due to inflation and potential taxes. Long term investments can be put into high-risk funds and stocks without it being that much historical risk associated to it. The market has historically always gone up, even if it regularly will take a stroll downwards into a recession. Note here that I talk about the whole market and not individual stocks and funds. Stocks tank all the time, which is why it will generally be a higher risk for you to invest your money in  one individual stock, than in a larger index.

I invest 80% of X in different index funds. Of these 80%, around 40% are branch-specific, quite risky and narrow indexes while the remaining 60% are large global index funds.

I am looking to leave my riskier branch-specific investments where they are but from now on start putting the whole 80%-chunk into global index funds. Mainly because I am still convinced he recessions is near and not sure which market it will hit first. The remaining 20% I place in stocks of different kinds, mostly larger companies with a good track record of raising their dividends shares each year. I will probably continue to buys socks for a few more months but then slowly shift this chunk over more and more to the global index funds as well. I will explain this more in step 3.

Number 3)

Have a set percentage to play with. This is where my 20% that I buy stocks for each month comes into play. I really like investing in stocks, and reweighing, shifting and shorting my way around the markets. This is not a very good thing if you are looking for a solid investment plan. This is why I have capped my allowance of my savings I can play with to 20%. I will decrease this percentage in the next few months. This as I don’t have enough time to become the next Gordon Gekko and index funds has historically almost always beat individual strategies in the long term anyway.

Number 4)

When the time has come for me to have enough capital for the Leprechaun to become immortal (i.e. enough for me to live off its returns indefinitely) I will sell off the funds and buy high-dividend stocks for these so that I am set up for a monthly income.

Thanks for all the positive feedback from my last post as well!

Cheers!

My first monthly income and expense report!

Ok! It is time for my first monthly income expense report and you guys will see the crushing numbers behind the machinery. I have converted them to USD, and will add explanations for the different posts (you will see that they in some ways differ from a person living in the U.K for example. My monthly income is ca 8200 (USD). After taxes, I get out ca 5k. This is a good salary for someone my age in Scandinavia, but as you can see, a lot of it ends up in the tax bucket. If you wonder why I am taking my monthly income expense report by months please take a look at my Nordic debunking of By Month!.

Monthly income expense report

Monthly Income Expense Report November:

+ Income after tax: 5000 USD (Salary)

– Expenses: 

Mortgage (incl. interest rate): 900 (we are paying it off as fast as we can)

Student loan: 100 USD

Phone bill: 24 USD

House insurance: 20 USD

Travel: 378 USD

Transportation: 30 USD

Blog setup: 95 USD

Gym: 40 USD

Food, Groceries: 220 USD

The couch: 200 USD

Shopping: 50 USD

Net savings: 2900 USD

Goals for next month:

Other income streams than just my salary! (It looks horrible just having one single income stream and so many lines of expenses. Many of these posts are things I should be able to cut down on, especially since Mr Viking has a similar setup with his budget.

Looking at this we clearly could see the need for either cutting some of our expenses or creating some other source income. This can be done by several steps:

Right now we looked at our expense and unfortunately saw that travel was a big monthly expense which we now will try to cut by travelling at low-priced periods, as well as to try to minimize the cost while travelling. Before we were not really aware of the amount spent when aboard, but when seeing it clear with a monthly income expense report. You get the information straight!

For all my readers, try to get your expenses on paper as clear as day. It is the only way to start keeping the money in check.

This is the first time displaying my monthly income expense report inspired by Michelles business income!!! Thank youuuu

/Freddie

 

Does Sweden have any tax friendly ways to save money?

Most heavily taxed country and still become FIRE. Tax friendly ways of saving money
Question:

Does Sweden have any tax friendly ways of saving money like the 401Ks or the RRSPs (the US and Canadian versions of this)?

We both do and we don’t 🙂 . In Sweden, there is a retirement-scheme that employers can choose to contribute to. It will not be subject to income tax until the day you as an employee retire and are able to access this fund (at which point you pay normal income tax on it, up to 57% marginal tax).

However I, as an employee, have no way of choosing whether to contribute to this or not. It is not considered a part of my gross salary put into a pension/401k-fund. Rather looked upon as an income you will never see and that is not counted towards you salary the way you would normally measure it. A good comparison would be with your employer paying for your health care in the US; you don’t consider it income, but rather a benefit. The same way this is considered a future benefit and not real, accessible money.

A big reason for this is that you have no right to touch this fund until you are around 61 (this could vary with a few years) and you can also not choose freely where to invest it but need to go via the broker your employer choose.

So, what do I do?

If I want to have the right to use my money before ~61 I have no other option than to pay the hefty income tax (I am not bringing up the HUGE benefits you do get from the state from living in a country like this here, that will be another post. Bear in mind that I have still chosen to live in Sweden and its crazy income taxes – there are things weighing up the apparent downside).

In addition to the income tax, there is also going to be a capital gains tax that will be added to any profit I make from the financial markets (yes, even keeping them in a savings account). This tax is currently 30% and quite tricky to declare each year when you file your tax report.

That doesn’t sound very good, what do now dear fire viking?

Don’t fear! There is always a solution to tax friendly ways of saving money. See my blog post My first monthly income and expense report! to see how much you can save.

There is something called an “Investment Savings Account” that all banks are obliged to offer their customers. If you trade or save under this specific account, there is no 30% capital gains tax on your profits. Instead a proxy value of the full amount you have had in this account will be taxed to a much lower tax rate.  Fluctuates depending on how much you had on the account at given points in time.

The downside with this account is that you pay taxes no matter if you make profit or not. Upside is that the taxation amount is very low.

Google “Investeringssparkonto” and you will see the exact calculation of this.  Or just trust me when I say it is definitely the way to go if you want to invest your money from an account in Sweden.

How we kept our expenses under control with 1 simple rule

Background:

Mr Viking and I bought an apartment a few months ago (I’ll get into the economics of how it is much more financially sensible to buy rather than rent n Sweden in another post), and apart from the money we are saving not having to pay rent, it has been an incredible demotivating experience from a savings-point of view. We both have fixed numbers we are expecting to put away after all expenses and invest each month (remember, the monthly salary in Sweden? :)) as part of The Leprechaun that will never die.

The problem:

However, ever since we bought this apartment, there has been a number of emergency expenses each months that has left us dumbfounded at the end , wondering what happened.

For example, we didn’t have a carpet for the hallway for the longest time, because we were trying to stay within budget and prioritize. It has started snowing here now, which means that every time someone clamps through our door, there will be a little puddle of water on our white, 100-year old-wooden floor *gasp*  and will soon leave permanent damage = decreasing the value of the apartment *thousand-folded-gasp*. Nonetheless, our sense of priorities shifts very quickly which means that we are not anticipating these costs.

Three months ago we bought bought a couch (did not have anywhere to sit in the living room before) and two bedside tables (I had a pile of books on the floor before that Mr Viking, -J,  kept tripping on). Which meant that we once again went over our budget, and it irritated me. By now we have been living here for so long that our expenses should have fluctuated back to status quo.

one rule that kept our expenses in check:

We came up with one rule that has changed all of this. Now, we meet budget every month and we are forced to anticipate costs and expenses that may come up. It is really very simple, but it has changed everything for us. The rule is:  We can only make one big purchase each month (No fixed upper or lower limit on what we mean with ‘big’, which helps us equate everything that is a real ‘purchase’ with ‘big expense’.

We have this rule set until the end of the year where we put a hard stop on even the one big expense per month and will probably move over to one each quarter. This month it is leaning towards a kitchen table, which we still don’t have. But, because we have this rule, we are now contemplating this purchase carefully before rushing away (weighing it against getting wardrobe doors for example, another thing we are still lacking, that will thus have to way)